Tesla, the operator of the world’s biggest lithium-ion battery in South Australia, says Australia’s Energy Security Board needs to catch up with the latest technology developments such as battery storage.

In a written response to the ESB’s consultation paper on the National Energy Guarantee, Tesla says the emissions reduction target is nowhere near strong enough, and says that the electricity sector can do much more than the 26 per cent asked of it by the Australia government.

“With the right mix of renewable energy and battery energy storage, emissions reduction can be achieved at scale, with speed and without impacting on energy security or reliability for end-use consumer,” it says.

Nor does it agree with the proposed use of international carbon credits as a substitute for emissions reductions in electricity. “For every tonne of carbon per MWh that is offset, a MWh of investment in new low emissions and reliable energy will be lost.”

But Tesla’s most damning criticism is on the ESB approach to battery storage. It notes that energy market rules have not caught up with battery storage technology, meaning much of its services go unrewarded. And its benefits appear to be ignored in the NEG.

Worse, the ESB seems unaware of what battery storage can do.

“The Consultation Paper also notes that ‘the ability of non-synchronous forms of generation such as wind, battery storage and solar photovoltaic powered generators to provide [frequency control, inertia and voltage parameters] easily is still developing’,” Tesla writes in its submission.

“With due respect to the Energy Security Board, Tesla believes that Hornsdale in South Australia has already demonstrated how effectively battery energy storage can provide these critical system security services.”

The Hornsdale Power Reserve is the official name of the 100MW/129MWh Tesla big battery that has been installed next to the Hornsdale wind farm.

Since it began operations in early December, it has stunned the energy world with its display of speed and versatility, its ability to intervene in different markets, and its ability to reduce the price gaming by the incumbent gas cartel.

To illustrate its point, Tesla included this chart above, highlighting the speed with which the Tesla big battery switched from charging to discharging in response to sudden changes in frequency. The switch occurred in a matter of a few seconds (bottom row).

Tesla noted that its battery accounts for around 30 per cent of the capacity in the South Australia market for FCAS (frequency control ancillary response, a key to grid security), so is a significant player.

But it also noted while 30-40 per cent of its services had been delivered to frequency markets, it had not been paid because the technical specifications on Australia’s grid were written based on fossil fuel generation assets. An issue we have highlighted here.

It urged rule-makers and policy makers to make changes that took account of new technologies. “Achieving an appropriate mix of generation assets is dependent on removing existing market barriers for battery energy storage as a technology type,” it says.

As an example, one perverse outcome of the NEG’s proposed “reliability obligation” may be that batteries like Tesla are required to pay for back-up, even though that is the very service they are providing. It all comes down to the way that such new technologies are defined.

They pointed out that the issues that the ESB sought to address in the NEG – such as the potential reduction in synchronous generation – may not be an issue in five years time, and the NEG may end up “gold plating” such assets.

Tesla noted that, as an asset class, battery energy storage is unique in that it can provide almost any grid service required other than providing a primary source of electricity.

“In front of the meter, energy storage can act like generation, providing firm capacity and energy on demand. Battery energy storage can also provide any ancillary services in the form of fast, well-shaped and coordinated synthetic inertia to improve power system frequency stability.

“In Australia this includes providing both regulation and contingency FCAS services, as well as System Restart Ancillary Services (SRAS) more commonly known as black-start.

“Battery energy storage can be integrated with existing and planned renewable energy capacity to manage variability on both a daily and seasonal basis – all of which can be forecast and scheduled in an orderly manner.”

But it also expressed fears that the energy stored in batteries may be penalised for not being “emissions free”, even thought the overwhelming source was likely to be wind and solar.

It wants the issues dealt with now, rather than being kicked down the road and added in later, because it notes may batteries are either being installed in the grid, or are about to be.

“Tesla would like to see the treatment of battery storage considered in appropriate detail from the beginning, rather than included at a later date.

“The NEG is in a unique position in that it will be adopted at a time when there are already battery assets registered in the energy market and a number of additional projects under development.

“As a result the NEG framework can take into account current market settings and issues surrounding battery storage as an asset class, rather than having to introduce sub-optimal settings at a later date.”

It wants batteries exempt from the NEG obligation, to avoid double counting (charging and discharging), and it wants clarity on the role played by battery storage installed in homes and businesses is recognised by the NEG.

Tesla is also proposing the world’s largest virtual power plant in South Australia, with some 50,000 homes to be linked to provide 250MW of capacity and 650MWh of storage. It notes Bloomberg New Energy Finance expects “behind the meter” storage to total 3GW by 2030.

“We want to avoid a situation where first movers for battery energy storage projects are unfairly disadvantaged with a NEG liability, while future battery energy storage projects may not be.

“We also want to avoid a situation where investment in battery storage is delayed whilst this market structure is being sorted.”

It also wants clarity over how the emissions of a battery are calculated.

“If battery paired with a renewable generator then deemed emissions intensity should be zero – even if battery does at time charge from the grid.

“This position takes into account the changing market definitions of batteries which will allow more utility-scale batteries to be installed “behind the meter”, while not disadvantaging first-mover projects registered under the interim guidance.

“If a battery is not paired with a renewable generator then deemed intensity should be lower that the unhedged spot market emissions intensity of the particular NEM region.

“The logic being the battery will charge when the wholesale spot market prices are low and this can be shown to be when wind generation is high and load low.”

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of The Driven. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.

Giles Parkinson is founder and editor of Renew Economy, and is also the founder of One Step Off The Grid and founder/editor of The Driven. Giles has been a journalist for 35 years and is a former business and deputy editor of the Australian Financial Review.

6 Comments

Ray Miller 1 year ago

The Energy Security Board with the NEG has more in common with the Spanish Inquisition. The quote which is applicable for the objective; “Tribunal (ESB) under the election of the Spanish (in our case LNP) monarchy, for upholding religious orthodoxy in their realm”.

Rob G 1 year ago

When a board operates against facts and to a secret agenda it sets itself up for a fall. No matter how you frame the lie it remains as a lie. It will be refreshing to have a government that will base decision making on facts. That may happen sooner than many think… stay tuned.

Mike Dill 1 year ago

If the SA election goes well, we may see that state pull out of a number of the ‘NEG’ative agreements.

howardpatr 1 year ago

Lord John Pierce catching up on energy storage is somewhat of an oymoron.

solarguy 1 year ago

Tesla is right in everything said here, but sadly with a Lib government now in SA things might go ape shit in regard to RE. Will the Aurora project go ahead, I certainly hope so!

itdoesntaddup 12 months ago

Tesla might have a point when their technology doesn’t require heavy subsidies. Until then, trying to secure revenue for a service that no-one has actually asked for (sub second response) that isn’t needed in a grid that operates with reasonably high levels of inertia is just trying to gild the subsidy lily. Another A$50m in subsidies to batteries just announced. Musk must be starting to consider Australia should be renamed Treasure Island.